Recent failures have exposed serious flaws in the prosecution's tactics in carousel fraud cases say John Binns and David Corker
Prosecuting carousel fraud—a pernicious VAT scam—is the responsibility of the Revenue and Customs Prosecutions Office (RCPO). Undoubtedly RCPO’s main activity is, and always has been, the prosecution of this type of fraud. A variant on missing trader intra-community (MTIC) fraud, carousel fraud exploits the fact that sales of goods across EU borders are zero-rated for VAT. Instead, when a UK importer, for example, sells a consignment of mobile phones to his UK customer, the entire amount of VAT he receives has to be paid to HM Revenue & Customs (HMRC).The goods are sold on through a number of UK companies (buffers) before finally being exported back to the EU trader where they started. The UK exporter is entitled to reclaim the VAT he has paid back from HMRC, mostly comprising the sum the importer should have paid at the start, and the EU trader is able to start the process again. RCPO was
